Argument preview: Tobacco case, 3rd round

Posted Tue, December 2nd, 2008 9:28 pm by Lyle Denniston

At 10 a.m. Wednesday, the Supreme Court will hear oral argument in Philip Morris USA, Inc., v. Williams (07-1216). Arguing for the tobacco company will be Stephen M. Shapiro of Mayer Brown in Chicago. Representing Mayola Williams will be Robert S. Peck of the Center for Constitutional Litigation in Washington, D.C. Filings in the case can be found on ScotusWIKI at this link.

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For most of a decade, Philip Morris USA, Inc., the cigarette company, has been feuding with the Oregon courts over a punitive damages award to the widow of a smoker "“ Mayola Williams. In the meantime, the verdict, with interest, has just about doubled. The Supreme Court has been drawn into the feud twice before; now, the company’s third appeal seeks to turn the fight into a contest between the Supreme Court and the Oregon Supreme Court.

Background

In 1993, the Supreme Court told the states that the Constitution does not allow juries to impose "grossly excessive" punishment for corporate wrongdoing. That was in the case of TXO Production Corp. v. Alliance Resources Corp. Since then, the Court has returned to the task of spelling out just what level of punitive damages verdict would be struck down as "excessive." No one in corporate America has tested the issue more often in state and federal courts than the nation’s cigarette makers, who have been frequent targets of punishing verdicts. There is a special place in those litigation annals for Philip Morris USA v. Williams (now docketed in the Supreme Court under 07-1216). By the end of the current Court Term, there will be a third precedent bearing that title.

The case grew out of the smoking addiction and the death of an Oregon man, Jesse D. Williams. For nearly five decades, he smoked cigarettes, up to three packs a day. About six months after he was diagnosed with inoperable lung cancer, he died. That was in 1997. Two years later, after a trial in which lawyers for his widow, Mayola, mounted a sweeping challenge to the entire cigarette industry for widespread harms to smokers in general, a jury awarded Mayola $821,485.50 in compensatory damages and $79.5 million in punitive damages. The verdict came, Philip Morris has since complained, after the trial judge refused to instruct jurors that their verdict was not to punish Philip Morris with punitive damages to make up for wrongdoing toward others not involved in the lawsuit; the judge had rejected the company lawyers’ proposed Instruction 34 "“ now, one of the most celebrated jury admonitions in civil litigation history, and certainly the most famous instruction never given.

After the verdict, however, the trial judge reduced the punitive award to $32 million, and the compensatory award was reduced to $521,485 under an Oregon law capping damages for wrongful; death. Both sides, dissatisfied, appealed. The Oregon Court of Appeals ruled that the judge should not have reduced the punitive verdict, reinstating it. It found no flaw in the judge’s refusal to give Instruction 34, saying the far-ranging harm caused by industry deception about the health hazards of smoking made it "appropriate to consider the effects of defendant’s actions on persons other than Williams." The Oregon Supreme Court refused to hear the case, but Philip Morris took the dispute on to the Supreme Court.

On Oct. 6, 2003, the Supreme Court (docket 02-1553) sent the case back to state courts "for further consideration in light of State Farm Mutual Automobile Insurance Co. v. Campbell" — the April 2003 ruling that laid down the rule that punitive damages could not be used to punish and to deter conduct not related to the harms done to those who sued. This time, the Oregon Supreme Court took on the case, again upholding the full $79.5 million punitive award after concluding that the jury could have reached the verdict because of the impact of Philip Morris’ conduct on "thousands of Oregonians" in addition to Williams. That was in February 2006.

Philip Morris returned to the Supreme Court (docket 05-1256), and the Supreme Court granted review. The Court, in its decision on Feb. 20, 2007, made a binding constitutional rule of what it had implied in the State Farm ruling "“ that is, that a punitive damage award violates due process if it is based in part on a jury’s desire to punish a wrongdoer for harming "non-parties" — "strangers to the litigation." It said the state Supreme Court was to "apply the standard we have set forth," perhaps leading to a new trial or at least a reduction of the punitive verdict. It declined to rule on a second question it had agreed to consider "“ whether the $79.5 million verdict was excessive.

The state Supreme Court, in response last Jan. 31, said "it is our task to apply the constitutional standard set by the Supreme Court in our consideration of the sole issue raised by Philip Morris, viz., whether the trial court erred in refusing to give proposed jury instruction No. 34." But, it said, it would not need to reach the federal constitutional issue "“ that is, the State Farm standard "“ if there is "an independent and adequate" basis in state law for upholding the jury’s punitive verdict.

And that is what it did. It found that the jury instruction had contained errors, and thus ran afoul of a state jury instruction standard dating back decades "“ that is, a judge’s failure to give a proposed instruction will not be overturned if the instruction was not "clear and correct in all respects…and altogether free from error." It went on to find Instruction 34 was flawed, misstating Oregon law in two respects. In the end, it was satisfied that the judge committed no error in refusing to give the instruction; it once again upheld the $79.5 million verdict.

Petition for Certiorari

Philip Morris on March 24 started its third appeal to the Supreme Court (docket 07-1216), raising two issues. First, it argued that, once the Supreme Court had ruled on the merits of its federal constitutional claim and told a state court to apply the proper standard, the state court had no authority "“ for the first time in nine years of litigating this case "“ to opt instead to rely on a state procedural rule. Second, it raised all over again the second issue the Court had agreed previously to review then left undecided "“ whether the $79.5 million verdict was constitutionally too high under the Court’s due process standards.

Lambasting the Oregon Supreme Court, the petition contended that the state court was bound to apply the State Farm standard and lacked the authority not to do so, that the procedural rule should have come into the case before the Supreme Court had ruled, and that the use of the rule was "nothing more than a pretext for the Oregon Supreme Court’s refusal to protect Philip Morris’ due process rights."

"The Oregon Supreme Court’s defiance of this Court’s directive should not be countenanced," the petition brusquely asserted. "The Oregon Supreme Court had no authority either to disobey the clear instructions of this Court or to conjure up state-law procedural grounds for the judgment after both it and this Court had reached the merits of Philip Morris’s federal claim."

Mayola Williams’ lawyers urged the Supreme Court to bypass this case, arguing that the procedural rule had been applied in this very case before the most recent state court ruling, that the rule dates back to 1916 and is regularly applied, and that 15 other states follow the same rule. The opposition also argued that the procedural rule was not a "meaningless ritual," but an important safeguard of a fair trial based on correct instructions to the jury. It also contended that Philip Morris had misrepresented the conclusions of the state courts, including its assertion that the state court had "defied" the Supreme Court by failing even to consider the State Farm standard. The procedural rule, it

Nothing in the Supreme Court decision in February 2007, the response argued, required Mrs. Williams to abandon her reliance upon the state procedural rule in defending the punitive verdict.

The Court granted review on June 9, 2008, but only on the question of the state court’s reliance upon the procedural bar following remand of the case by the Supreme Court. It thus declined to rule on whether the $79.5 verdict was invalid.

Merits Briefs

The two sides’ merits briefs renew their conflicting stances on whether the Oregon Supreme Court "defied" the Supreme Court, on whether Philip Morris had sufficient notice that the procedural rule would be belatedly used against it, on whether the procedural rule has legitimacy under Oregon law, and on whether the Supreme Court had already "“ at least implicitly "“ rejected the procedural rule’s use in this case.

Philip Morris puts new emphasis on its contention that the only proper remedy, at this stage, is for the Supreme Court to directly order a new trial, rather than returning the case to state courts for one more chance to examine the constitutional standard’s application to the $79.5 million verdict. Although the Supreme Court had suggested that a reduction of that award might be a proper outcome, the company argued that "there is no way to know what amount of punishment a properly instructed jury would have imposed. In this case, had the jury understood that it could punish Philip Morris only for the impact of its conduct on Jesse Williams, it might well have selected an award far below the constitutional holding."

In response, Mrs. Williams’ lawyer contended: "It is time for this litigation marathon to end. Jesse Williams’ widow has courageously fought against great odds to bring this case to trial and prevailed nine years ago in an intensely contested, well-managed five-week jury trial….At this late stage, after all of the full briefings, exhaustive hearings, and multiple decisions, sending an individual without the resources and experience of its opponent back to square one again would epitomized the idea that justice delayed is justice denied." Moreover, the brief added, the factual and legal landscape on tobacco company liability has changed markedly in those nine years, so that a retrial now could not present the same issues as in the original trial.

An array of business and conservative advocacy groups support Philip Morris’ appeal, arguing that it is not uncommon for lower courts to defy the Supreme Court’s repeated admonitions to control soaring punitive damage verdicts, and contending that litigants need to know "“ at trial, not later "“ what the procedural ground rules will be for trying punitive damages cases. Business groups in particular stressed their keen interest in enforcement of the Supreme Court declaration that punitive verdicts are not to be imposed to fulfill a jury desire to punish someone other than the litigants.

The Criminal Justice Legal Foundation, in a brief supporting neither side, urged the Supreme Court to write a new definition of what kind of state-law ground would be adequate to head off review of a federal issue. In the past, the brief said, the Supreme Court has used "a haphazard patchwork [of phrases] that has drawn considerable scholarly criticism." The definition it proposed: "the claimant should have notice that the rule exists and applies to his situation and should have a reasonable opportunity to present his federal claim."

Mayola Williams picked up, unsurprisingly, the support of the state of Oregon and seven other states, urging the Court to protect the authority of state courts to employ their procedural rules when cases are returned to them by the Supreme Court for a new look. She also draws the support of four retired Justices of Oregon’s highest court, defending the integrity of that court and arguing that the rule it applied is familiar and long-standing. Other amici on her side of the case include an array of anti-tobacco groups, trial lawyers, and professors of legal procedure.

Analysis

Philip Morris’s task on this third appeal is to hold together the five-Justice majority that sent the case back to the Oregon Supreme Court. The other four Justices seem beyond its reach: they already had found the $79.5 million punitive verdict to be valid. It is thus unlikely that they would take a different stance just because the state court had found a new way to sustain that verdict "“ unless, of course, they were to accept the argument that the state court had "defied" a clear Supreme Court mandate.

The five Justices who ordered the new look are unlikely to read the state Supreme Court’s response as negatively as Philip Morris has characterized it, and yet they could see in that response a threat to the integrity of the constitutional rule against punishing for harm to non-parties. That was a major development in the push to narrow the scope of punitive damages in general, as a majority of the Court, made up of different Justices, has been attempting to do since at least 1993.

It would appear that Mayola Williams’ lawyers have done a fairly good job of defending the pedigree of the state procedural rule at issue, so the Court may not be so ready to accept Philip Morris’ characterization of it as novel and perhaps even surprising. Rather than get into the niceties of state law interpretation, the Court’s majority may want to reach for a simpler response: simply order a new trial, and let both sides take their chances. It is hard to know whether the plight of Mrs. Williams, waiting for finality, would be persuasive for at least some in that majority "“ perhaps Justice Stephen G. Breyer (although he wrote the 2007 decision) or Justice David H. Souter. The others in that majority were Chief Justice John G. Roberts, Jr., and Justices Samuel A. Alito, Jr., and Anthony M. Kennedy.

The four on the other side were Justices Ruth Bader Ginsburg, Antonin Scalia, John Paul Stevens and Clarence Thomas.

Upcoming Oral Arguments

3/31Kimble v. Marvel Enterprises, Inc. Whether the Court should overrule Brulotte v. Thys Co., which held that “a patentee’s use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se”.

4/20Johnson v. United States Whether possession of a short-barreled shotgun is a violent felony, leading to a longer prison term as a career criminal.

4/21McFadden v. United States A federal prosecutor’s duty to prove that a suspect knew that a substance was an illegal substitute for a banned drug.

4/22Horne v. Department of Agriculture The federal government’s duty to pay raisin growers for an order requiring removal of part of a year’s crop from the market to stabilize prices.

On Monday afternoon Justices Anthony Kennedy and Stephen Breyer testified before the House Appropriations Committee. The purpose of the hearing was to discuss the Court’s budget for the next fiscal year and the federal judiciary, but the legislators also took full advantage of the occasion to touch on other topics as well.